• Day-one is a red day, continuing an established trend and closing at the lower trading range near the days low

• The second day is red or blue day that also trades at a lower range with the opening and closing near each other.

• The upper wick of the second day should be at least twice as long as the body

• The lower wick of the second day should be non-existent or very little.

The Inverted Hammer appears in a market that opens at or near its low, creating a candle with a small real body. During the day buyers rallied price fairly high, but were unable to sustain the rally.

• Psychology and Confirmation Signals for Bullish Inverted Hammer

In a market characterized by downtrend, bulls are able to rally price up briefly, but not enough to close above the days open. This can be a warning for shorts to anticipate a further, more sustainable bullish rally. The reversal trend is confirmed by bullish moves the next day.

In day-three the higher the candle holds above day-twos body, the more likely the shorts will cover their positions, hence leading to the weakening of a bearish market. Many bottom pickers will start longing the market once that occurs, leading to a bullish reversal. Confirmation for the Inverted Hammer pattern is strongly suggested for this pattern.

The strong bullish Gravestone Doji pattern is similar to the Inverted Hammer pattern, except Gravestone Dojis second day is characterized by a clear doji where open and close prices equal each other, rather than a small body.